Bloomberg News

Colorado Plans to Sell $147 Million of COPs for School Buildings

November 29, 2011

Nov. 29 (Bloomberg) -- Colorado, which can’t offer general- obligation bonds without voter approval, plans to pay for school projects by selling almost $147 million in certificates of participation, its largest sale of long-term debt this year.

The tax-exempt securities will help pay for construction in 10 school districts, a preliminary offering document shows. The financing program has aided 22 projects since it began in 2009, Brett Johnson, the deputy state treasurer, said yesterday.

The certificates to be sold as soon as today are similar to revenue bonds, since the districts finance their part through property taxes and back up the debt with collateral, Johnson said by telephone. Through the program, the state has put up more than $390 million, with matching funds supplied by recipients, according to Moody’s Investors Service. The state pays off the debt from proceeds of leases on the structures.

“The school district has to raise certain funds and then the state matches that,” Johnson said. “It’s 10 financings in one; all bundled up with state and local funds and the school buildings as collateral.”

Moody’s rated the debt Aa2, its third-highest grade, with a stable outlook. The securities scored one step lower than Colorado’s issuer credit, at Aa1, because the state’s payment is subject to appropriation, the New York-based company said in a Nov. 14 report. Standard & Poor’s gives the notes an AA- grade, fourth highest.

RBC Capital Markets is the issue’s lead manager.

Certificates of participation, also known as COPs, rely on legislative funding approval to cover debt service each year, according to the offering document.

The securities will mature from March 2012 to March 2032, when the largest segment, almost $28.9 million, will be due, the document shows. General-obligation debt rated one step higher had yields ranging from 0.43 percent to 4.14 percent yesterday for similar maturities, according to a Bloomberg Fair Market Value index.

--Editors: Ted Bunker, Pete Young.

To contact the reporter on this story: Brian Chappatta in New York at bchappatta1@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net


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